Mixed media performance

SPH's Print Ad revenue in 1Q19 recorded a y-o-y drop of 2.7%, the slowest seen in four quarters. SPH’s digital-first strategy also gained some traction, with digital revenue up 10.1% y-o-y. However, media revenue continued to be dragged by steeper-than-expected declines in classifieds (-17.1% y-o-y) and circulation (-10.8% y-o-y).

The lower circulation volume helped to reduce overall material costs despite 26% growth in average newsprint charge-out prices. We note that 1Q is seasonally stronger for the media segment.

Maiden contribution by overseas asset management

Already SPH's largest profit generator at c.55%, the property segment continues to grow with the recent purchase of Figtree Grove (via its 70%-owned SPH REIT (SGX:SK6U)) and tender for a mixed development site at Pasir Ris. The group’s first UK PBSA (c.S$300m assets) also contributed S$6.3m and S$3.2m to its topline and PBT, respectively.

We see faster expansion of its overseas asset management portfolio and better quality assets as possible near-term catalysts for the stock.

Slow progress at Woodleigh

While the average launch price of over S$2,000 psf was above our forecast of S$1,850 psf for Woodleigh Residences, we think the property cooling measures introduced in 2018 could affect the uptake rate of the project (slated for completion by end-Aug 2022). We understand that only 55% of the first 50 units released were sold during the soft launch, with the second phase scheduled for 3QFY19.

Maintain HOLD with a lower SOP-based Target Price

As we assume higher property income from SPH REIT, our FY19-21F EPS are now 0.6- 2.0% higher. However, our SOP-based Target Price falls to S$2.64 as we allocate a bigger RNAV discount to its Woodleigh project, in line with the broad property market.

Maintain HOLD.

Upside/downside risks could stem from media performance and pace of capital recycling.

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